The Manitoba Securities Commission has issued an order allowing mutual fund reps to flow commissions through their personal corporations.

The Mutual Fund Dealers Association of Canada reports that the MSC has recently issued an order that provides, subject to certain terms and conditions, a registration exemption to permit a closely held corporation, established and controlled by a registered salesperson, to receive payments of commissions or fees from the salesperson’s registered dealer.

The order indicates that the commission has determined that it would not be prejudicial to the public interest to permit the payment of commissions or fees to a corporation that is not registered.

The terms and conditions include: restrictions on the structure of the corporation; and a requirement for a written contract between the corporation and the dealer setting out the dealer’s responsibility for any registerable activities conducted by the corporation.

The commission says it is not prescribing the form of contract between the dealer and the corporation. The purpose of the contract is to prevent a registrant from using the corporation to shield itself from responsibility for trading or advising activities.

The MFDA rules require that any remuneration be paid directly to the rep, although regulators in British Columbia, Nova Scotia, Ontario and Saskatchewan have suspended that particular rule to December 31, 2008.